Medical devices such as disposables, implants, hospital equipment and diagnostic reagents should now have a minimum local content of 25-50 per cent to qualify for public procurement as the Department of Pharmaceuticals (DoP) has finalised the new norms amid expressions of discontent by domestic and multinational industry lobby groups.

As per the final guidelines that took effect on May 18, the percentage of minimum local content specified varies according to the type of the device. In order to be eligible for public procurement, medical disposables and consumables require a minimum indigenous content of 50 per cent. For implants, the DoP has set a cutoff percentage of 40 per cent. In the case of medical electronics, hospital equipment, surgical instruments and diagnostic reagents/in-vitro diagnostics, domestically manufactured components should contribute to a minimum 25 per cent of the total cost. The new norms will remain applicable for a period of one year.

The guidelines have been set following the Department of Industrial Policy and Promotion (DIPP) identifying the DoP as the nodal department for implementing the provisions of Public Procurement Order 2017 related to pharmaceutical industry. However, the department is in the process of collecting accurate and reliable data on production capacity, level of competition and manufacturing details of various medical devices. The percentage of local content, manner of calculation and purchase preference given to domestic companies might be revised once relevant data in this regard becomes available.

Though the norms were formulated to ensure that Indian products get preference during the procurement process, they were flayed by domestic manufacturers and multinational companies alike, albeit for entirely different reasons. While, the Association of Indian Medical Device Industry (AiMeD) has expressed deep disappointment over the policy citing lack of preferential pricing and incentives on quality improvement to Indian firms, Medical Technology Association of India (MTaI), which represents leading multinationals with significant investments in the country, said broad-brush criteria for public procurement would cause proliferation of low-quality products in the country.

The domestic manufacturers are upset as the policy, despite stipulating measures to promote local content, fails to provide any corpus for ensuring no late payments by government. Such a corpus is imperative to ward of any adverse impact on financials of a company in case of delayed payments by the government, they say.

“We are disappointed. The prime minister wants to boost Make in India with Buy in India and DIPP provided a preferential purchase order with a 20 per cent margin of preference for domestic manufacturers. However this margin of preference is not preferential pricing of 20 per cent as is the case in some countries like China which, we are informed, gives 15-25 per cent price preference and others like Malaysia, Jordan, Uganda and Indonesia that give 15 per cent. But DIPP Order only allows Indian bidders to match the L1 lowest price bid of a foreign manufacturer (read Chinese) if his bid was within 20 per cent range. The whole intention of prime minister and of amending General Financial Rules 153 got diluted, we wonder if he's aware of this,” AIMED Forum Coordinator Rajiv Nath said in a statement.

“Unlike several other sectors, medical devices include thousands of very varied products in engineering and design complexity. A uniform 25-50 per cent local content ask, preceding any meaningful scaling up of the missing sophisticated component ecosystem will create a risk of ‘garage manufacturing’ with low cost, low quality Chinese knocked-down kits based assembly,” MTaI Director Probir Das opined.